Risky Business: DRC Mining Gambles

Mining firm Alphamin is intent on building a mine in the Democratic Republic of Congo’s (DRC) northeastern province of North Kivu. It will be the first modern mining operation in this historically insecure region of the Congo.

The Toronto-listed firm is breaking ground at a site called Bisie, in the Walikale territory of North Kivu. It boasts among the world’s richest tin deposits. However, the challenges—from poor infrastructure to roving militant groups—are all too real.  

Alphamin plans to put $134m into pre-production investment, then to raise debt and equity through 2016 and 2017 to fund the ramp-up phase and working capital.

The Bisie mine is expected to produce some 9,900 tonnes of low cost tin concentrate for 12 years, with first yields expected at the end of 2018 according to the firm. With a promised 48.4% internal rate of return for investors, it is easy to see how many would bite despite the risks.

However the project has certainly not been easy. The remote location and lack of infrastructure in much of the DRC means the company has had to build its own road to the site using little more than manual labour. A mobile phone tower only recently went up in the area.  

Then there is the question of security.

Walikale is now safer than many parts of conflict-prone North Kivu. However as recently as 2014, militant groups operating in the area attacked Alphamin’s base camp, which fell within the territory of three competing armed groups.

One might wonder why a company would choose to set up operations in one of the DRC’s most unstable areas even as a constitutional crisis over the rule of president Joseph Kabila threatens to tip the entire country back towards conflict.

Boris Kamstra, chief executive of Alphamin Resources Corp, says the firm had been exploring various commercial options but decided that tin stands out as a particularly interesting commodity. Prices for the metal are on the rise, and changes in technology are fueling demand.

“The demand profile for tin changed completely when it was included in electronic solders to replace lead. You have a historic lack of exploration and underdevelopment of tin assets, which looking forward gives you a declining supply,” Mr Kamstra explains.

He downplays the risk from armed groups, saying most are now based outside Walikale and further eastwards, while stressing the work Alphamin has put into developing ties to the local communities in which it operates.  

However rebel groups still act as competition to outsiders arriving to mine in ‘their’ areas, as well as targeting companies for extortion and banditry.

DRC has a long history of its rich mining assets being coopted by militant groups to fund their violent campaigns. A 2013 UN report estimates that 98% of the gold sold from Congo that year was smuggled out, mostly through neighbouring Uganda.

Fueling conflict?

Alphamin does attempt to address the problem of conflict minerals explicitly. The company says the Bisie mine will comply with the US Dodd-Frank Act.

The Act, a wide-ranging reform bill focused mostly on financial sector reform after the 2008 financial crisis, includes a requirement that all US-listed companies determine origins for gold, tin, tungsten and tantalum sourced from the DRC or an adjoining country.

The idea is that transparency in value chains will weed out conflict minerals, starving the groups that depend on their revenues. This is much easier to do in theory than in practice.

At present more than 50 different armed groups still operate in the DRC’s borderlands, often forcing the local population to join their ranks, participate in their military and logistical activities or to turn a blind eye to criminal activities. Determining loyalties, as well as origins of mineral exports, is difficult in this fluid context.

Henri Ladyi, who leads the Centre Résolution Conflits (CRC) peace group in North Kivu, says that rebel groups have been forcibly recruiting workers and fighters during a string of bloody raids in 2015 and 2016. They target and kidnap “strong young people” who, after being trained in the bush, are used to help the militias.

He says armed groups also try to trick younger recruits into joining them.“Some local people are getting information that there are number of [plots] available for them for agriculture, so they are moving from their village into the zone that is controlled by rebels.” 

Criminalized rebel groups can pose as credible employers or protectors because many young Congolese have grown up with the instability caused by these armed groups and see the situation as normal. There are also very few legitimate alternatives in North Kivu, exacerbating the conflict and risks for companies that come into the areas.

Bjorn van Wees, Africa analyst at the Economist Intelligence Unit, does not think that the arrival of a large Western mining company like Alphamin will make much of a difference to the employment prospects of young people in the region.

“Investment projects are clearly a very important part of any peacebuilding process. The creation of jobs and revenue-generating activities can help boost stability. Unfortunately in the DRC, the authorities are ill-equipped to make good use of the revenues generated by mining projects,” he says.

He also warns that bringing in a project of this scale and then failing to live up to local expectations can have serious consequences. “A failure by the government to ensure that benefits from the new tin mine…go beyond jobs could heighten tensions if government revenues from the project are not invested back into the community,” he points out.

Breaking the longstanding link between the area’s abundant natural resources, illicit smuggling networks and armed groups will only happen if the DRC’s government can provide the security that legitimate large and small employers need to return to the area.

Until then, the only companies that will venture out to North Kivu will be the ones like Alphamin who can afford to bring their own private security with them—and even then their ventures will be met with scepticism in many quarters.

An earlier version of this article was published at This Is Africa and reappears here with kind permission.

The post Risky Business: DRC Mining Gambles appeared first on Foreign Policy Blogs.